At its meeting yesterday, the FASB discussed constituents’ feedback on its proposal¹ to simplify the presentation of debt issuance costs in the financial statements and decided to draft a final Accounting Standards Update (ASU) that would require an entity to:

• Present debt issuance costs in the balance sheet as a direct deduction from the debt liability in a manner consistent with the entity’s accounting treatment of debt discounts.
• Apply the new guidance retrospectively to all prior periods.
• Provide transition disclosures that include:
  • The nature of, and reason for, the change in accounting principle.
  • A description of the prior-period information that has been retrospectively adjusted.
  • The effect of the change on the financial statement line item.

The FASB also decided that for public entities, the ASU would be effective for annual periods beginning after December 15, 2015, and interim periods within those annual periods. For all other entities, the ASU would be effective for annual periods beginning after December 15, 2015, and interim periods within annual periods beginning after December 15, 2016. Early adoption would be permitted.

The Board directed its staff to draft a final ASU for vote by written ballot.

For more information about the FASB’s proposal, see Deloitte’s October 14, 2014, Heads Up.

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1 FASB Proposed Accounting Standards Update, Simplifying the Presentation of Debt Issuance Cost.